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As technology becomes more essential to the day-to-day running of a captive insurance company, we look at two technology companies in the area which are well-equipped to provide solutions for captives
The importance of technology is becoming ever more apparent in the captive insurance industry in recent years and, despite its small size, it will soon have to conform to modern requirements.
Captives are now using technology to accurately assess risk, make business decisions and adhere to reporting requirements.
Marcus Schmalbach, CEO of RYSKEX, says the industry will soon have to submit to the impending advance of “digital transformation”.
“The captive market is similar to the rest of the insurance market—the top technology topics are the effects of artificial intelligence and blockchain.”
“The strategy papers have already been worked out in the companies’ c-suite, but the operative implementation still leaves plenty of room for fantasies. There are very few pilot projects, and most of them provide incremental rather than disruptive added value for businesses.”
Denise Kelly, owner and principal at Pentacle Data, adds that technology is “extremely important” in the captive insurance industry.
“In order to accurately assess risks and make wise business decisions, data must be accurate from the start. Risk data comes from many outside sources; from the parent organisation, to the actuarial firm, onto the captive manager.”
“If this data is presented in different forms (spreadsheet, PDF, different automated systems), a manual process is inevitable.”
She explains: “This can cause huge errors transferring data from one source to the next. These mistakes can go unnoticed for a long time. These mistakes ultimately affect the captive’s financial statements. The worst case scenario, it can make a captive become insolvent. Automation eliminates manual error and gives the Captive’s parent organisation confidence in their financial statements.”
The future
So what is next for captive insurance technology?
Schmalbach says predicting the future is not an easy thing to do and future technology will likely depend on which “pain points” of the captive industry they solve, including talent acquisition, an inefficient value chain, capacity bottlenecks, a changing risk landscape, and the resulting challenges to classify and price emerging risks.
Can technology solve these problems? Schmalbach says yes.
“The more digital the industry becomes, the more interesting it becomes for the ‘digital natives’,” he adds, “accordingly the captive market will (have to) increasingly digitalise itself”.
For Kelly, data is king and the advances in the digital economy, including insurtech, cryptocurrency and automated processes, mean that the insurance industry must “adapt and evolve”.
“Captives have always led industry chage and been used as incubators of risk, technology challenges will be no different.”
In terms of blockchain, Schmalbach says it can be used anywhere information needs to be securely managed and verified, offering a variety of uses in the captive insurance industry.
The potential benefits of blockchain to the captive industry include support for the ability to efficiently develop and maintain client data cross multiple geographies and parties with less human intervention; allow information to be directly linked to administrative processes; offer more transparency; and reduced administrative and compliance costs.
RYSKEX and Pentacle Data
Both Kelly and Schmalbach are working towards the common goal of a technology ecosystem in the captive insurance industry through their own companies, Pentacle Data and RYSKEX, respectively.
According to Kelly, there is an untapped demand for efficient online data management solutions for captives and other risk retention vehicles.
“The need for a reliable, scalable product is required even more now as regulatory, compliance and market pressures over data management, integrity and adaptability increase annually,” she adds.
“We have had an encouraging amount of interest, which has led to further discussions and demonstrations for potential clients.”
“Many of these clients have been in the captive space, but we have also spoken to entities in the direct insurance space, the managing general agent/managing general underwriter sector, and agencies.
For Schmalbach, the RYSKEX ecosystem is the result of years of research.
The company has “dealt with the digital transformation of the captive environment”, and Schmalbach says—without false modesty—that the company can claim to be able to profitably influence the future of the captive market with its solution.
“Through the technological use of blockchain and artificial intelligence and the holistic solution approach, this is a promising solution that is currently carrying out various projects with selected Lloyd’s syndicates and captives.”
“The captive market is facing an unprecedented reorientation and RYSKEX is pleased to be able to proactively accompany this process.”
